Subconscious Obligation and Its Role in Passive Retention!

Recently, L’Oréal USA became the first company in the world to receive an EDGEplus certification. The certificate awarded by EDGE (Economic Dividends for Gender Equality) is a global standard that moves “ beyond gender and measures the intersectionality between gender and race/ethnicity, gender identity, sexual orientation, age, disability, and nationality. ”

This move towards gender and pay equity is not new. L’Oréal has been committed to it and diversity and inclusion for a long time. 69% of its workforce is made up of women. It directly employs 1,381 people with disabilities and when you include suppliers the total figure is much higher.

It’s not just the world’s biggest brands that are turning to diversity and inclusion (D&I). Home-grown Indian brands like Zoho have been genuinely aiming for diversity, offering opportunities to deserving individuals who may be put on the back burner by others.

A classic example is Zoho’s software development engineer, Abdul Alim, who started as a security guard. The SaaS firm gave him a chance (and the tools to learn to code) that landed him a job in their technical team. The employee has been with Zoho Corporation for 8 years now.

With that as the backdrop, we unpack how diversity and inclusion create psychological contracts, building a feeling of obligation, leading to passive retention.

The Mediating Role of Obligation in Passive Retention

Home-grown Indian brands like Zoho have been genuinely aiming for diversity, offering opportunities to deserving individuals who may be put on the back burner by others. Click To Tweet

We know the nature of job roles is changing. The belief that an employee is ‘for life’ is slowly eroding. Tenures are getting shorter, with voluntary turnover becoming the norm. Where in 2014, only 5.5% of employees left voluntarily; in 2019, 10.1% did.

It makes employee retention all but essential for every organisation. Actively retaining talent, particularly in the remote work era, is just one side of the coin. Passive retention plays an equal role because the majority of decisions employees make occur in the subconscious mind.

So, what’s the key to passive retention?

Building psychological contracts. Salary, perks, and recognition unquestionably attract the right talent but guaranteeing that they stay requires a psychological contract, built over time.

And how do you create such a contract? One way is through more inclusive hiring.

What’s a Psychological Contract?

In employer-employee relations, there are two forms of contracts – written and unwritten. Psychological contracts fall under the latter category. It is an individual’s belief of reciprocal obligation. Essentially, the two parties (employer and employee) invest in the relationship because they expect mutually positive outcomes.

The contract is informal and often implicit, so much so that sometimes the employer (or the employee) may only be dimly aware of it. Nonetheless, psychological contracts are a vital determinant of the behaviour and attitudes of employees. It significantly governs job outcomes like employee satisfaction and retention.

Psychological contracts are a vital determinant of the behaviour and attitudes of employees. It significantly governs job outcomes like employee satisfaction and retention. Click To Tweet

The link between obligation and retention

When employers hold up their end of the bargain, i.e., fulfil the contract, it reinforces psychological safety. The employee feels connected and obligated to the organisation and, therefore, more engaged with their work.

Inversely, when the psychological contract is unmet or broken, job outcomes are adversely affected. The employee feels let down, disengaged, and lacks morale. It can even sow resentment. Combined, it results in poor performance, absenteeism and eventually turnover.

Building a psychological contract through inclusion

A psychological contract emerges when an employee believes that the company has made a promise of future return. The return could be better pay, benefits, new projects, skill development, or something else, but they all create a perception of indebtedness.

The employee works harder to provide future benefits to the organisation and also remains committed to it. This feeling of duty and being beholden is often subliminal, but it knits the intention to stay, adding impetus to a long-term association.

So, how do organisations establish a psychological contract? Through its culture and policies, one of which is diversity and inclusion.

Diversity and inclusion are the keys

There have already been a number of studies proving that a diverse workplace improves retention. One found that 67% of job seekers and 57% of employees find diversity an important characteristic of their workplace, directly impacting recruitment and turnover.

In addition to diversity, inclusion fosters engaged employees. Teams working in an inclusive culture outperform their peers by an astounding 80%. Why? Because people are more comfortable when they have the freedom to be themselves.

There are plenty of reasons why D&I are the key to unlocking passive retention, but at the crux of it is the element of true empathy. When organisations practise active equality and not tokenism, giving opportunities to people who deserve them but are generally side-lined, they demonstrate empathy.

The result is a psychological contract that shapes all future employee behaviour. These employees look at the organisation from a different lens and feel indebted for being given a chance. They are more grateful for being hired, therefore, more loyal, and that leads to a lower attrition rate.

It’s important to note here that diversity means more than simply hiring women. It includes a wide spectrum, from giving opportunities to minorities and differently-abled people, to freshers and people from different backgrounds, genders or otherwise. All of it builds a psychological contract and results in passive retention.

The Takeaway

Organisations need to be cognizant of the fact that diversity and inclusion are not mere HR concepts. Earnest adoption can become a business success strategy because it plays a pivotal function in structuring subconscious obligation. Ultimately, this leads to a more productive workforce and higher retention.

Think about it: when the very first association of an employee with the organisation is so overwhelmingly constructive (being offered an opportunity when other employers didn’t), it creates a domino effect. All their future behaviour, attitude and responses are positive. Those roots of obligation make them more embedded in their jobs, ensuring retention and improving business performance.